Summary of Performance
ASIAN OPERATIONS
JUSTIN BREHENY
CEO, Asia
IAG’s Asia division made further progress during the year towards its aspiration to be a leading general insurer in the region.
The focus for our existing businesses in Thailand and Malaysia was to continue to create value through transferring capability, particularly in core competencies such as underwriting, product development, and claims and risk management.
In Thailand, our NZI Thailand and Safety Insurance businesses increased gross written premium by a combined 4%, and expanded market share. This improved result was achieved despite a challenging environment caused by political unrest and marked by a significant decline in car sales, strong competition and a decline in consumer confidence.
As the Thai market slowed, competition intensified with a number of insurers seeking to maintain market share through aggressive pricing. Our businesses used the opportunity to undertake a comprehensive review of our portfolio to implement improvements to claims management, pricing and underwriting practices. Taking a disciplined underwriting approach has meant we have chosen not to write some risks that we believe to be unprofitable. Instead we have focused on growing segments, markets and products where we have a competitive advantage.
In Malaysia, our joint venture AmAssurance grew gross written premium by 10%. This was the result of growth in our motor agency business as well as product diversification, particularly through IAG’s capability transfer programme of extended warranty, which achieved a 76% penetration rate in targeted areas, as well as commercial, health and personal accident products.
During the year, we continued our disciplined review of a number of acquisition opportunities in the Asian region to build our portfolio of businesses.
We remain committed to pursuing long-term investment opportunities in China’s general insurance market, and are actively pursuing investment opportunities.
To support sustainable growth in the Asian region, we have built a risk framework for our current and future operating businesses and this is central to the way our Asian companies conduct business.
We also focused on building a unified culture across our businesses. As part of that process, employee engagement was measured across all our employees in Asia for the first time. The results of the employee survey are enabling us to target our engagement efforts, to ensure we’re addressing issues that are important to our people.
LOOKING FORWARD
We will continue to take a two-fold approach to support our aspiration to become a leading general insurer in the Asian region.
We will continue to build via acquisition a portfolio of strategic investments in predominantly personal lines insurers in key priority Asian countries.
At the same time, we will look to unlock and create value in those assets through capability transfer of our core competencies in underwriting, product development, claims management, risk management, direct distribution, reinsurance and asset management.
In Thailand, the insurance market is expected to grow about 8% over the coming year as the economy recovers, consumer confidence returns and industry reforms continue. We aim to capitalise on that growth by continuing to diversify our product suite to include consumer credit, gap, travel and accident, mid-market commercial and health insurance. We will also expand the geographic reach of Safety Insurance with new branches in the north and north-east of Thailand.
In Malaysia, we expect premium revenue growth to exceed 10% as AmAssurance continues to further diversify from traditional motor into commercial, health, warranty, consumer credit and gap insurance. We have also reached agreement with our Malaysian partners to increase our ownership in the general insurance business of AmAssurance from 30% to 49% in the coming year, while divesting our interest in the associated life insurance business.
REDUCING RISK
“ DIVERSIFICATION? IT REALLY MEANS ALL THE EGGS AREN’T IN THE ONE BASKET.”
Our Thai business, Safety Insurance, is one of the companies in IAG’s growing international portfolio.
Just five years ago, almost 100% of IAG’s business was in Australia. Now, more than 25% of our business is written overseas, and these operations contributed about $1.9 billion to our revenue for the year.
New Zealand remains our second biggest market with about 13% of our gross written premium generated there, ahead of the United Kingdom at about 10%. And premiums written in Asia now make up around 3% of our business.
Expanding our business across different international geographies is one way in which we are reducing risks for our shareholders. It means we diversify and increase our revenue streams, reduce volatility, and lower our cost of capital.
As well as expanding internationally, we’ve also diversified our portfolio of general insurance products, and the channels through which we sell them. From our historical base as a motor insurer selling policies direct to customers through our branches, we now offer many lines of insurance, with multiple products in each, sold via branches, phone, internet and via intermediaries and partnerships.
We will continue our targeted international expansion, and aim to grow our portfolio of general insurance products. For our customers it means the security of belonging to one of the world’s largest general insurance groups. And for shareholders it means we reduce our overall operating and investment risk.
